F.P. Journe

patrick_y
[PuristSPro Moderator]
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Yes! Market demand, margins overall, etc. is all interesting stuff!

Grey market dealers typically take relatively little risk. They have very small store fronts so their overhead costs aren't terribly high. They only buy things with the intention of holding onto the product for a couple months at most. You can be a successful grey market dealer starting with $100K in your pocket. Retail partners typically hold onto a 1.3 years worth of inventory (although with demand so high now, they don't have to hold onto much inventory at all nowadays). Thus, capital and opportunity cost is a bigger deal for a retailer, plus the added overhead expenses.
At the end of the day. Everybody has to have some margin. The person who makes the most can change. Sometime the grey market guy makes the most money. Sometimes it's the retailer. Sometimes it's the manufacturer. Some people are really critical that manufacturers are starting stores and trying to capture the entire margin, I find this criticism unnecessary, as there are HUGE COSTS to starting stores and these stores cost a fortune to run. They're also a tremendous amount of risk in bad economic times as these stores are almost always unprofitable in bad times and are only sometimes profitable in good economic times. And corporate owned stores are often in the most expensive rental areas and historically aren't always big money makers since the rents are high, sales aren't necessarily high, but it helps market perception of the brand. They also spend a fortune to decorate these corporate owned stores - a simple Rolex store in a mall using landlord approved contractors and vendors took over $3M to build the interior (the mall provided the space empty). Those interior store fixtures are typically depreciated in as little as 8 years. So $400,000 in costs per year just on the beautiful interior! It's not easy sometimes...